Oil snaps 3-day losing streak
Perth, May 24, 2010
Oil snapped three straight sessions of declines and rose more than 1 percent towards $71 a barrel on Monday, but analysts said sentiment remains fragile.
US crude for July delivery rose 70 cents to $70.74 a barrel by 0455 GMT, while London Brent crude gained 22 cents to $71.93.
"There has been a significant decline in oil prices over the past couple of weeks so there might be some traders who think that oil has been oversold and are looking to buy in at these levels," said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd.
"Oil could remain as the casualty of negative sentiments in the short term, but it should rebound when the panic subsides because we're still seeing strong growth in Asia and the US economy is also slowly recovering."
Since striking a 2010 high just above $87 a barrel on May 4, crude prices have fallen in 11 of the last 15 trading days and touched a low of $64.24 on Thursday last week, its weakest since September last year.
Germany's parliament approved on Friday its portion of a $1 trillion safety net to stabilise the euro as fears swirled that Europe's debt crisis and tougher financial regulation may choke economic recovery.
However, worries persist that Greece's debt troubles could spread to other indebted nations, dragging down Europe's economy and curtailing trade to the United States and Asia.
Calls for other European economies to cut spending and slash their budget deficits have also sparked worries that the region's economy would slow, curtailing energy demand.
Although oil prices will no doubt remain at the mercy of broader macroeconomic pessimism, analysts at Barclays Capital said recovering demand in the US and other non-industrialised economies, such as China, the Middle East and India, would lift prices.
"With oil fundamentals improving fast, we expect prices to pick up once the phase of severe risk reduction abates," Barclays capital oil analyst Amrita Sen said in a report. - Reuters